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International Journal of Social Science & Interdisciplinary Research

Vol.1 Issue 8, August 2012, ISSN 2277 3630

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IMPACT OF JOB SATISFACTION AND ORGANIZATIONAL

COMMITMENT ON EMPLOYEE LOYALTY

MS. CHETNA PANDEY*; MRS. RAJNI KHARE**

*Assistant Professor,

Aditya College,

Gwalior.

**Assistant Professor,

BVM College of Management Education,

Gwalior.

ABSTRACT

Employee loyalty can be defined as employees being committed to the success of the

organization and believing that working for this organization is their best option. The aim of the

study was to find the impact of job satisfaction and organizational commitment on employee

loyalty. This study also finds out the relationship between job satisfaction and organizational

commitment. Further the study will also find the comparison of employee loyalty in

manufacturing and service industry. At last the factors affecting employee loyalty was also

determined. To achieve the aim of the study questionnaire survey was used. The results show

that there is an impact of job satisfaction and organizational commitment on employee loyalty.

KEYWORDS: Job Satisfaction, Organizational Commitment, Employee Loyalty.

______________________________________________________________________________

INTRODUCTION

Employees are a vital resource for nearly all organizations, especially since they represent a

significant investment in terms of locating, recruiting, and training let alone salaries, healthcare

plans, bonuses, etc. The management of many organizations develops their training programmes,

benefit packages, performance appraisal and work system based on their company policy.

Usually these policies are aimed at developing loyal employees because this leads to a more

lengthy tenure. The longer an employee works for a company the more valuable they become.

DEFINITIONS

EMPLOYEE LOYALTY

"Loyalty, as a general term, signifies a person's devotion or sentiment of attachment to a

particular object, which may be another person or group of persons, an ideal, a duty, or a cause.

It expresses itself in both thought and action and strives for the identification of the interests of

the loyal person with those of the object" (Encyclopedia Britannica, 1998).

Employee loyalty (typically synonymous with commitment) to the organization has sometimes

been viewed as an attitude. However, it is not so much an attitude (or thought component) that is

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important in organizations, but rather it is the bottom-line action component (Meyer & Allen,

1991). Employee loyalty is the willingness to remain with the organization (Solomon, 1992).

Employee loyalty can be defined as employees being committed to the success of the

organization and believing that working for this organization is their best option. Not only do

they plan to remain with the organization, but they do not actively search for alternative

employment and are not responsive to offers (The Loyalty Research Center, 1990). Employee

loyalty is an organizational citizenship behavior that reflects the allegiance to the organization to

the promotion of its interests and image to the outsiders. (Bentten Court, Gwinner and Meuter,

2001). Employee loyalty is a manifestation of organizational commitment, the relative strength

of an individual‟s identification with and involvement in a particular organization (Mowday,

Porter and Steers 1982), Based on internalization and identification (O‟Reilly and Chatman

1986). This behavior‟s can be characterized by three related factors. They are strong belief and

acceptance of the organization‟s goals and values, a willingness to exert considerable effort on

behalf of the organization and a strong desire to maintain membership in the organization.

(Mowday, Porter and Steers 1979)

JOB SATISFACTION

Job satisfaction is a term used to describe how content an individual is with their job. It is a

relatively recent term since in previous centuries the jobs available to a particular person were

often predetermined by their parent‟s occupation.

Job Satisfaction also refers to the employee‟s general attitude towards his job. It refers to the

contentment experience by an employee when his wants are satisfied. Job satisfaction is defined

as positive affect of employees towards their job or job situations (Locke, 1976). Job satisfaction

is considered as the most important and frequently studied attitude in the field of Organizational

Behavior (Mitchel & Larsel Hoppock (1935) stated that job satisfaction is “any combinations of

psychological, physiological and environmental circumstances that cause a person truthfully say

„I am satisfied with my job‟. The term job satisfaction can be defined as a positive feeling about

one‟s job (Robbins, 2007) Job satisfaction is a set of favorable or unfavorable feelings and

emotions with which employees‟ view their work (Newstrom, 2007). Consequently they

advocated reform of management practices to reflect a humanistic concern for employees and to

enhance employee work satisfaction. Job satisfaction was subsequently linked to increases in

productivity, though the nature of causality has continued to be strongly debated (Katzell et al.,

1975).

ORGANIZATIONAL COMMITMENT

Meyer and Allen (1994) state that organizational commitment is “a psychological state that a)

characterizes the employee‟s relationships with the organization, and b) has implications for the

decision to continue membership in the organization” “Organizational Commitment is typically

measured by items tapping respondents‟ willingness to work hard to improve their companies,

the fit between the firm‟s and the worker‟s values, reluctance to leave, and loyalty toward or

pride taken in working for their employers” (Maume, 2006). The concept of organizational

commitment has attracted considerable interest in an attempt to understand and clarify the

intensity and stability of an employee‟s dedication to the organization (Mester, Visser, Roodt &

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Kellerman, 2003) Allen & Meyer (1990), defined organizational commitment as “psychological

state that binds the individual to the organization (i.e. makes turnover less likely).

According to Northcraft and Neale (1996), commitment is an attitude reflecting an employee‟s

loyalty to the organization, and an ongoing process through which organization members express

their concern for the organization and its continued success and well being. Organisational

commitment is “the degree to which an employee identifies with a particular organisation and its

goals, and wishes to maintain membership in the organisation” (Robbins, 1998, p. 142). Bateman

and Strasser (1984) states organizational commitment as “multidimensional in nature, involving

an employee‟s loyalty to the organization, willingness to exert effort on behalf of the

organization, degree of goal and value congruency with the organization, and desire to maintain

membership” (p.95).

REVIEW OF LITERATURE

EMPLOYEE LOYALTY

Many researchers conducted research on employee loyalty in western context showed relation

between the various antecedents of employee loyalty Walker (2005) found that satisfied

employees will become loyal when they perceive their organization as offering the opportunities

to learn, grow and at the same time providing a clear established career path that they can pursue

in the organization. He also found that training and development to be one of the biggest factors

that lead to employee loyalty. According to the report, employees want the opportunity to grow,

and they want career path and opportunities that allow them to advance within the company. This

study found that the benefits package correlated with employee loyalty measures. Benefits

package take into account factors such as, the amount of vacation, sick leave policy, amount of

health care paid for by the organization. Florkowsi and Schuster, (1993), found a positive

relationship between profit sharing and job satisfaction and commitment. Meyer and Allen

(1997) recognize that in order for there to be continuance commitment between the employee

and organization, the employee must be able identify alternatives. This was supported Carlson

(2005), who concluded that in order for the employees to be committed, which is a broad

definition of loyalty, they look forward to the opportunities of continuous learning in order to

improve their skills and knowledge. Fosam et al (1998) suggested strongest correlation between

employee satisfaction and employee loyalty in their study comes from the following satisfaction

variables, namely, recognition and rewards, teamwork and cooperation, working conditions and

relationship with supervisor. The score for relationship with supervisor strongly correlates with

all three dimensions of employee loyalty. Taylor (1979) identified the essential components of

quality of work life as basic extrinsic job factors of wages, hours and working conditions, and the

intrinsic job notions of the nature of work itself which results in employee loyalty. Jawahar

(2006), found that Performance appraisal played a role in the relationship between employee

satisfaction and employee loyalty in this study. Performance appraisal is an important element of

satisfaction because it is positively related to job satisfaction, organizational commitment and

negatively related to turnover intentions. Job satisfaction and organizational commitment fall

into a broader definition of loyalty.

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JOB SATISFACTION AND ORGANIZATIONAL COMMITMENT

There are numerous investigations that have studied the relationship between organizational

commitment and job satisfaction (Currivan, 1999). Predominant view is that job satisfaction is

an antecedent to organizational commitmen (Lincoln & Kalleberg, 1990; Mowday; Porter, &

Steers, 1982; Mueller, Boyer, Price, & Iverson, 1994; Williams & Hazer, 1986). There is also

some support for the reverse causal ordering, organizational commitment as an antecedent to job

satisfaction (Vandenberg & Lance, 1992). LaLopa (1997) effectively used the Organizational

Commitment Questionnaire to evaluate 300 non-supervisory resort employees' levels of

commitment. Further, LaLopa developed a "Resort Job Satisfaction" scale by adopting items

from previous studies. Findings provide further evidence that job satisfaction is a significant

predictor of organizational commitment. Many studies use different facets of satisfaction to

predict employee attributes such as performance, organizational commitment, and service quality

(Dienhart & Gregoire, 1993; Oshagbemi, 2000a, 2000b; Yousef, 1998). It‟s a debatable issue

whether job satisfaction is the predictor of organizational commitment or vice versa. Several

researchers have made the case that job satisfaction is a predictor of organizational commitment

(Porter, Steers, Mowday, & Boulian, 1974; Price, 1977; Rose, 1991). Andrew Hale Feinstein did

a study on the relationships between job satisfaction and organizational commitment of

employees at two locations of a national restaurant chain in Southern Nevada. They also worked

on revealing homogeneous demographic characteristics these employees exhibit that affect their

satisfaction level. Research was conducted through a survey instrument consisting of

demographic, job-satisfaction, and organizational commitment questions adopted from the

validated Minnesota Job Satisfaction and Organizational Commitment Questionnaires. Results of

the study indicate satisfaction with policies; compensation, work conditions, and advancement

have a significant relationship to organizational commitment. Slattery & Selvarajan (2005)

examined the associations between job satisfaction, organizational commitment, and turnover

intention among temporary employees. The results, based on structural equation modeling,

provide support for nearly all of the hypothesized associations in the model. They found positive

associations between job satisfaction and organization commitment.

JOB SATISFACTION, ORGANIZATIONAL COMMITMENT AND EMPLOYEE

LOYALTY

The following review shows the relationship between job satisfaction, organizational

commitment and employee loyalty. Abdullah et al (2009) in their study among the service

employees found that increase of employee satisfaction could actually result in increased in

employee participation and has the potential of making both the employee and employer equally

loyal to the company. Basically employee satisfaction is dependent on benefits package, training

and development, relationship with supervisor, working conditions, teamwork and cooperation,

recognition and rewards, empowerment and communication. Whereas, employee loyalty is a

result of the satisfaction that stems from satisfaction variables such as, recognition and rewards,

working conditions, teamwork and cooperation, and relationship with supervisor. Price 1977 and

Mobley et al. (1979) stated that, employees with a low job satisfaction level have a high

likelihood to quit their job. This is supported by Shaw (1999) study which looks at the

relationships between job satisfaction and the inclination to quit. The study found that there is a

high inclination for an individual to quit job if his or her level of job satisfaction is low.

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Additionally, employees in such a situation are also likely to be absent from work (MacShane et

al. 1984, Hackett and Guinon 1985, Scot and Taylor 1985). Jawahar (2006) found that

Performance appraisal played a role in the relationship between employee satisfaction and

employee loyalty in this study. Performance appraisal is an important element of satisfaction

because it is positively related to job satisfaction, organizational commitment and negatively

related to turnover intentions. Job satisfaction and organizational commitment fall into a broader

definition of loyalty. Walker (2005) also found that satisfied employees will become loyal when

they perceive their organization as offering the opportunities to learn, grow and at the same time

providing a clear established career path that they can pursue in the organization. Aizzat et al

(2003), found that organizational commitment has a direct relationship with employees‟

satisfaction level towards pay, promotion system, work, supervision and co-workers. The study

concludes that promotion system is the most important factor influencing an employee‟s

commitment level. Donna (1996), found a significant positive correlation between each of the

employee loyalty, and the three follower outcome variables, both job satisfaction and

organizational commitment. Landsman‟s (2001), found that in a multivariate causal model, a

relatively small number of key variables affect job satisfaction and commitment. Specifically,

commitment was enhanced by three factors: stronger perceived support from both the supervisor

and the agency; opportunities for advancement.

RESEARCH METHODOLOGY

OBJECTIVES

To develop standardize and measures to evaluate job satisfaction, organizational

commitment and employee loyalty.

To study the impact of job satisfaction and organizational commitment on employee

loyalty in manufacturing and service industry.

To study the difference between employee loyalty in manufacturing and service industry.

To study the relationship between job satisfaction and organizational commitment.

To find out the factors affecting loyalty of employees.

To identify new areas for further research

HYPOTHESIS FRAMED

Ho(1): There is no impact job satisfaction and organizational commitment employee loyalty in

manufacturing industry.


service industry.

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Ho(3): There is no significant difference between loyalty in manufacturing and service

organization

Ho(4):There is no significant relationship between job satisfaction and organizational

commitment.

RESEARCH METHODOLOGY

The research is based on primary data. Data was collected through self-designed questionnaire,

administered to the teams of employees manufacturing and service industry of Gwalior Region

to generate views on job satisfaction, organizational commitment and employee loyalty. The

questionnaires on 5-point (Likert) scale were prepared to evaluate job satisfaction, organizational

commitment and employee loyalty consisting 31, 14 and 19 items respectively. In this study,

Judgmental (non probability) sampling technique was used. A sample of 200 employees was

selected for the purpose of this study, which included 100 employees of both manufacturing and

service industry respectively.

In this study, statistical tools such as item to total correlation to establish the internal consistency

of the questionnaire, Cronbach‟s alpha to check reliability and Regression Analysis to find out

the effect of job satisfaction and organizational commitment (independent variable) on employee

loyalty (dependent variable) and correlation analysis was used to find out relationship between

job satisfaction and organizational commitment were applied. Further T-test was applied to make

comparison between loyalty of employees in manufacturing and service employees. At last

factor analysis was to find out the factors affecting employee loyalty.

RESULTS

After studying the data of 200 employees by applying the statistical tools following results were

found:

CONSISTENCY MEASURE

Consistency of all the factors in the questionnaire was checked through item to total correlation.

In this correlation of every item with the total was measured and the computed value was

compared with standard value of (0.137). Only those factors/statements were accepted whose

value was more than the standard value.

RELIABILITY MEASURE

JOB SATISFACTION: Reliability of the measure was tested using SPSS software and the

Cronbach‟s Alpha value was found to be 0.951 and the Split half value was found to be 0.894.

The face validity was checked and found to be high.

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ORGANIZATIONAL COMMITMENT

Reliability of the measure was tested using SPSS software and the Cronbach‟s Alpha value was

found to be 0.891 and the Split half value was found to be 0.886. The face validity was checked

and found to be high.

EMPLOYEE LOYALTY: Reliability of the measure was tested using SPSS software and the

Cronbach‟s Alpha value was found to be 0.836 and the Split half value was found to be 0.755.

The face validity was checked and found to be high.


manufacturing industry.

TABLE 1: SHOWING REGRESSION COEFFICIENT VALUES

Model

Unstandardized

Coefficients

Standardized

Coefficients

t Sig. B Std. Error Beta

1 (Constant) 26.788 4.222 6.345 .000

Job sat .279 .077 .567 3.637 .000

Orga.

comm .131 .155 .132 .844 .401

JOB SATISFACTION

(Manufacturing)

ORGANISATIONAL

COMMITMENT

(Manufacturing)

EMPLOYEE LOYALTY

(Manufacturing)

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A. DEPENDENT VARIABLE: EMPLOYEE LOYALTY

Regression analysis was applied between Job satisfaction, organizational commitment

(independent variables) and Employee Loyalty (dependent variable) in manufacturing

organizations. The results of regression indicate that independent variables (Job Satisfaction and

Organizational Commitment) has significant relationship with dependent variable (employee

loyalty) signified by the coefficient of Beta factor of job satisfaction is 0.567 and T value is

3.367 is significant at 0.0 significant level hence it can be said that job satisfaction is having

significant impact on employee loyalty. The other independent variable organizational

commitment is having beta coefficient of beta factor 0.132 and T value 0.844 the significance

level of this value is 0.401 which again signifies impact of organizational commitment on

employee loyalty.

The null hypothesis that there is no significant impact of job satisfaction and organizational

commitment on employee loyalty is not accepted which means that there is significant impact of

job satisfaction and organizational commitment on employee loyalty in manufacturing industry.


service industry

TABLE 2: SHOWING REGRESSION COEFFICIENT VALUES

Model

Unstandardized

Coefficients

Standardized

Coefficients

t Sig. B Std. Error Beta

1 (Constant) 23.313 4.497 5.184 .000

Jobsat .367 .043 .731 8.426 .000

Orga comm .053 .108 .043 .492 .624

JOB SATISFACTION

(Service)

ORGANISATIONAL

COMMITMENT

(Service)

EMPLOYEE LOYALTY (Service)

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A. DEPENDENT VARIABLE: EMPLOYEE LOYALTY

Regression analysis was applied between Job satisfaction, organizational commitment

(independent variables) and Employee Loyalty (dependent variable) in manufacturing

organizations. The results of regression indicate that independent variables (Job Satisfaction and

Organizational Commitment) has significant relationship with dependent variable (employee

loyalty) signified by the coefficient of Beta factor of job satisfaction is 0.731 and T value is

8.426 is significant at 0.0 significant level hence it can be said that job satisfaction is having

significant impact on employee loyalty. The other independent variable organizational

commitment is having beta coefficient of beta factor 0.43 and T value 0.492 the significance

level of this value is 0.624 which again signifies no impact of organizational commitment on

employee loyalty.

The null hypothesis that there is no significant impact of job satisfaction on employee loyalty is

not accepted which means that there is significant impact of job satisfaction and on employee

loyalty on service industry and the hypothesis stating that there is no impact of organizational

commitment on employee loyalty is accepted. This shows that employee loyalty is not affected

by organizational commitment in service industry.

Ho(3): There is no significant difference between employee loyalty in manufacturing and service

organization

TABLE 3: SHOWING INDEPENDENT SAMPLES TEST VALUES

Levene's

Test for

Equality

of

Variances t-test for Equality of Means

F Sig. t df

Sig. (2-

taile

d)

Mean

Difference

Std.

Error

Difference

95% Confidence

Interval of the

Difference

Lower Upper

VAR00001 Equal

variances

assumed

.738 .391 -

.007 198 .995 -.01000 1.51767 -3.00287 2.98287

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TABLE 3: SHOWING INDEPENDENT SAMPLES TEST VALUES

Levene's

Test for

Equality

of

Variances t-test for Equality of Means

F Sig. t df

Sig. (2-

taile

d)

Mean

Difference

Std.

Error

Difference

95% Confidence

Interval of the

Difference

Lower Upper

VAR00001 Equal

variances

assumed

.738 .391 -

.007 198 .995 -.01000 1.51767 -3.00287 2.98287

Equal

variances

not

assumed

-

.007 197.979 .995 -.01000 1.51767 -3.00287 2.98287

The Levene‟s test value 0.738 at 0.391% significance level shows that the two samples are

having unequal variance and the T value -0.020 at 0.995% significant level suggest that the null

hypothesis that there is no significant difference between employee loyalty in manufacturing and

service organizations is not accepted. This means that the employee loyalty differs in

manufacturing and service organizations.

Ho(4):There is no significant relationship between job satisfaction and organizational

commitment.

To determine strength of linear relationship between variables correlation coefficients are

calculated. These correlation analyses were interpreted on the scale offered by Guilford (1956)

(i) r< 0.20 indicates slight, almost negligible relationship (ii) r= 0.20 to 0.40 indicates low

correlation, definite but small relationship (iii) r= 0.40 to 0.70 indicates moderate correlation,

substantial relationship (iv) r= 0.70 to 0.90 shows high correlation and (v) r> 0.90 is indicative of

very high correlation, very dependable relationship

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TABLE 4: SHOWING CORRELATIONS COEFFICIENT VALUES

Job Satisfaction Organizational Commitment

JS Pearson Correlation 1 .771**

Sig. (2-tailed) .000

N 200 200

OC Pearson Correlation .771**

1

Sig. (2-tailed) .000

N 200 200

**. Correlation is significant at the 0.01 level (2-tailed).

The correlation between job satisfaction and organizational commitment is r=0.771 which shows

that there is high relationship between job satisfaction and organizational commitment as per

Guilford (1956) which suggests that the null hypothesis that there is no relationship between job

satisfaction and organizational commitment is not accepted, suggesting that there is a

relationship between jobs satisfaction and organizational commitment in both manufacturing and

service organization.

FACTOR ANALYSIS: The raw scores of 19 items were subjected to factor analysis to find out

the factors that contributed towards Employee Loyalty. After factor analysis, four factors are

identified. The factors were commitment, motivation, belongingness and career development.

1. COMMITMENT (5.364): This factor has emerged as the most important determinant of

employee loyalty with 28.2295% of variance. The major elements constituting this factor

include; speak positively about the company (0.799), if got a offer would not change

organization (0.739), enjoy discussing my organization to others (0.719), will work indefinitely

(0.705), emotional attachment (0.678), organization is of great personal meaning (0.527).

2. MOTIVATION (2.225): This factor has emerged as an important determinant of employee

loyalty with 11.180% of variance. The major elements constituting this factor include; growing

with this company (0.694), Recommend Company to friend (0.656.), recommends my employer

JOB SATISFACTION ORGANISATIONAL

COMMITMENT

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to other employees (0.630), clearly defined roles and responsibility (0.506), part of the

organization (0.538).

3. BELONGINGNESS (1.382): This factor has emerged as an important determinant of

employee loyalty with 7.274% of variance. The major elements constituting this factor includes;

organizational problems are my own (0.713), strong belonging to my organization (0.628), loyal

to my organization (0.552), committed to company‟s success (0.516).

4. CAREER DEVELOPMENT (1.322): This factor has emerged as an important determinant

of employee loyalty with 6.957% of variance. The major elements constituting this factor

includes; take pride in my work (0.668), fulfill my career goals (0.663), look ways to improve

my organizational efficiency (0.649), would stay with company in the future (0.513).

CONCLUSION

The objectives of the study were to find out the impact of job satisfaction and organizational

commitment on employee loyalty in manufacturing and service industry, to compare between the

loyalty of employees in manufacturing and service industry, to study the relationship between

job satisfaction and organizational commitment and to explore the underlying factors affecting

employee loyalty. The findings of the research conclude that there is a significant impact of job

satisfaction and organizational commitment on employee loyalty in manufacturing industry and

in case of service industry job satisfaction has an impact on employee loyalty but organizational

commitment has no impact on employee loyalty. Also there is significant difference in loyalty

exist between the employees of manufacturing and service industry. Further there is a

relationship between job satisfaction and organization commitment. At last the underlying

factors of loyalty emerged from this study are commitment, motivation, belongingness and

career development

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ANN EXURES

TABLE 1: SHOWING RESULTS OF FACTOR ANALYSIS OF EMPLOYEE

LOYALTY

Factor Eigen value Variable/ Convergence Statement Loadings

Total %

variance

Commitment

5.364

28.229

15. I speak positively about the company to

friends

.799

17. would not change company if got a offer .734

14. I enjoy discussing my organization to

others

.719

19. I will work for this company indefinitely .705

9. I am not emotionally attached to company

11. organization is of great personal

meaning to me

.678

.527

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Motivation

2.125

11.186

3. in 5 years I‟ll still be growing with this

company

.694

4. I would recommend this company to

friend

.656

8. I‟ll recommend my employer to other

employees

.630

6. Clear definition of roles and responsibility .506

13. I am part of family at this organization .463

Belongingness 1.382 7.274

12. organization‟s problems are my own .713

10. strong belonging to my organization .628

18. I am loyal to my organization .552

1. I am committed to company‟s success .524

Career

Development

1.322 6.957

5. I take pride in my work .668

2. I can further fulfill my career goals .663

7. look ways to improve organizational

efficiency

.649

16. like to stay with this company in the

future

.510

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